ACTION UKRAINE REPORT - AUR

An International Newsletter, The Latest, Up-To-Date
In-Depth Ukrainian News, Analysis and Commentary

Ukrainian History, Culture, Arts, Business, Religion,
Sports, Government, and Politics, in Ukraine and Around the World

Mr. E. Morgan Williams, Publisher and Editor, SigmaBleyzer

WASHINGTON, D.C., MONDAY, AUGUST 13, 2007

INDEX OF ARTICLES --------

Clicking on the title of any article takes you directly to the article.

Return to Index by clicking on Return to Index at the end of each article

1. UKRAINE DECREE 31 SETS LOW PRICE FOR GAS, FORCES
ITS SALE TO THE GOVERNMENT AND IS DESTRUCTIVE
TO THE DEVELOPMENT OF ENERGY RESOURCES SAYS
ROB BENSH, CHAIRMAN OF CARDINAL RESOURCES

INTERVIEW: With Rob Bensh, Chairman &
Chief Executive Officer, Cardinal Resources
By: Morgan Williams, President

U.S.-Ukraine Business Council (USUBC)
Washington, D.C., Monday, August 13, 2007

2. THE WORLD BIOFUEL BOOM AND UKRAINE -
HOW TO REAP THE BENEFITS, Policy Paper No. 7
Letter-to-the-Editor: By Dr. Heinz-W. Strubenhoff
Institute for Economic Research and Policy Consulting
German-Ukrainian Policy Dialogue in Agriculture
Kyiv, Ukraine, Thursday, August 9, 2007

3. EBRD PROJECT SUMMARY WITH UKRAINE'S UKRTRANSNAFTA
Ukrtransnafta Project Summary Document (PSD)
European Bank for Reconstruction and Development (EBRD)
London, United Kingdom, Friday, August 10, 2007

4. NAFTOHAZ SPOILT BY PETROLEUM PRODUCTS
Ukrainian cabinet said to prepare oil company for privatization
By Oleh Havrysh, Vitaliy Selik and Ivan Hech
Kommersant-Ukraina, Kiev, in Russian 9 Aug 07 p 5
BBC Monitoring Service, United Kingdom, Sat Aug 11, 2007

5. HOLTEC TO START COMPLETION OF NUCLEAR WASTE

Interfax Ukraine Energy Weekly, Kyiv, Ukraine, Sunday, Aug 12, 2007

6. UKRAINIAN ELECTION COMMISSION REFUSES OPPOSITION
PARTICIPATION IN ELECTIONS; TYMOSHENKO CALLS FOR

SUPPORT FOR DEMOCRATIC PROCESS IN UKRAINE
Press Release, BYuT, Kyiv, Ukraine, Saturday, Aug. 11, 2007

7. BYuT PARTY BARRED FROM UKRAINE POLL
By Roman Olearchyk in Kiev
Financial Times, London, United Kingdom, Monday, August 13 2007

8. UKRAINE ELECTION PANEL REFUSES TO REGISTER MAIN
OPPOSITION CANDIDATES
Associated Press (AP), Kiev, Ukraine, Saturday, August 11, 2007

9. OPPOSITION ERECTS TENTS IN UKRAINIAN CAPITAL TO
PROTEST DENIAL OF ELECTION REGISTRATION
Maria Danilova, AP Worldstream, Kiev, Ukraine, Sunday, Aug 12, 2007

10. THE PARTY OF REGIONS' CONGRESS: STRENGTHENING THE
YANUKOVYCH-AZAROV-KLYUYEV AXIS - THE LIST AND
PROGRAMME OF THE 'REGIONALS'- A CORRECTION OF
THE STATUS QUO, Writer analyzes electoral list of ruling party
ANALYSIS & COMMENTARY: By Oleksiy Popov
Source: 2000, Kiev, in Russian 10 Aug 07
BBC Monitoring Service, United Kingdom, Sun, Aug 12, 2007

11. PRESIDENT'S DEMAND TO REPEAL LEGISLATIVE IMMUNITY
Television Address: Official Website of President of Ukraine
Kyiv, Ukraine, Thursday, August 9, 2007

12. EARLY PARLIAMENTARY ELECTIONS IN UKRAINE:

FIRST SALVOS
ANALYSIS & COMMENTARY: Dr. Volodymyr Hrytsutenko,
Franko National University (Lviv)
Action Ukraine Report (AUR) #857, Article 12

Washington, D.C., Monday, August 13, 2007

13. MARATHON OIL COMPANY JOINS THE U.S.-UKRAINE
BUSINESS COUNCIL (USUBC) IN WASHINGTON

By Morgan Williams, SigmaBleyzer
President, U.S.-Ukraine Business Council (USUBC)

Washington, D.C., Monday, August 13, 2007

14. EASTERN EUROPE'S UNTAPPED MASS MARKET
Disposable income concentrated mainly in just
three countries - Poland, Ukraine and Russia.
By Stefan Wagstyl, Financial Times, London, UK, Mon, Aug 6 2007

15. U.S. PRODUCERS TAKE ON STEEL IMPORTS
Should existing duties on imported steel from China, India,
Ukraine and nine other countries should be continued.
By Robert Guy Matthews, The Wall Street Journal
New York, NY, Saturday, July 28, 2007; Page A2

16. ING BANKING SEES INVESTMENTS IN UKRAINE AROUND

50 MILLION OVER NEXT TWO YEARS
Stefan Kloet, Dow Jones Newswires, Amsterdam, Holland, Wed, Aug 8, 2007 .

17. BRYAN MARCUS, NEW UKRAINE DESK OFFICER FOR ECONOMIC
AND BUSINESS AFFAIRS AT US STATE DEPT IN WASHINGTON
By Morgan Williams, SigmaBleyzer
President, U.S.-Ukraine Business Council (USUBC)
Washington, D.C., Monday, August 13, 2007

18. PM YANUKOVYCH, US DEPUTY ASSISTANT SECRETARY OF
STATE DAVID KRAMER DISCUSS THE ECONOMY, WTO
David Kramer makes his third trip to Ukraine this year
Ukrainian News Agency, Kyiv, Ukraine, Thursday, August 2, 2007

19. SUNFLOWER B&B HOTEL IN KYIV
"Who needs ads when you're this good?"
Lonely Planet website, August 2007

20. FOURTH OF JULY SPEECH: BY WILLIAM TAYLOR, U.S.
AMBASSADOR TO UKRAINE
U.S. Embassy, Kyiv, Ukraine, July 4, 2007

21. MOLDOVA - A RETURN TO RUSSIAN INFLUENCE?
ANALYSIS: George Ballantine, Margareta Mocreac and Olga Khromova
BBC Monitoring research, BBC Monitoring Service
United Kingdom, Tuesday, August 7, 2007

22. KILLERS WITH IDEOLOGIES, Was Lenin as bad as Stalin and Hitler?
Book Reviewed by Simon Sebag Montefiore
The Washington Post, Washington, D.C.
Sunday, August 12, 2007; Page BW06

23. THE CRIMEAN MOUNTAINS AND CRIMEAN RIVIERA
INTERNET ENCYCLOPEDIA OF UKRAINE

Dr. Marko R. Stech, Managing Director, CIUS Press
Project Manager, Internet Encyclopedia of Ukraine
Canadian Institute of Ukrainian Studies
University of Toronto, Toronto, Ontario, August 2007

INTERVIEW: With Rob Bensh, Chairman &
Chief Executive Officer, Cardinal Resources
By: Morgan Williams, President
U.S.-Ukraine Business Council (USUBC)
Washington, D.C., Monday, August 13, 2007

WASHINGTON, D.C. - Rob Bensh, Chairman and Chief Executive
Officer, Cardinal Resources, a member of the U.S.-Ukraine Business
Council (USUBC) in Washington, contacted the USUBC about a major
problem that has developed concerning the sale of gas by companies
involved in Joint Activity Agreements (JAA) in Ukraine.

A new Cabinet of Minister's Decree (Decree 31) forces such companies as
Cardinal to sell gas only to the government of Ukraine and at prices far
below the competitive market price.

The decree, which is part of the Budget Law drafted by Finance Minister
Azarov and approved by Prime Minister Yanukovich, is very destructive
to the private development of energy resources and to private international
investors in Ukraine.

Cardinal has been operating in Ukraine for 10 years conducting E&P
(Exploration and Production) for oil and gas in Ukraine for resale into
Ukraine.

Cardinal is a UK plc with a U.S. Corporation (Delaware Corp) 100%
subsidiary (Carpatsky Petroleum) that owns 100% of the oil and gas rights
in question.

The management team is comprised entirely of American oil and gas
executives. A majority of Cardinal's equity held in the U.S. while 75% of
Cardinal financing is from U.S. investors. Cardinal conducted an IPO last
year on the London Stock Exchange.

Cardinal has been an active supporter of democratic development in Ukraine
and for international engagement in reform issues associated with developing
a strong, positive Foreign Direct Investment (FDI) environment.

USUBC: Rob, thanks for contacting the USUBC about the problem of private
gas sales in Ukraine. Tell us about the major issue that has developed
concerning Cardinal's right to sell its gas in Ukraine to private buyers at
competitive market prices.

ROB BENSH: Cardinal historically sells its gas in Ukraine to Industrial End
Users at market prices (currently about $4.80 mcf).

The Government of Ukraine passed a new budget act in January 2007 which
obligates any JAA (Joint Activity Agreement) to sell its gas to NAFTA GAZ
at a fixed government rate of about $1.50 mcf, which, indeed, is below
production costs of about $$1.70 mcf.

Cardinal had been injecting its gas into storage to avoid selling it at
uneconomic prices. It has recently been learned that UkrGas Production has
been selling Cardinal gas to the Government of Ukraine without Cardinal
knowledge or permission.

Decree 31 of the budget act is specifically designed to benefit the
Government of Ukraine in this year's current budget as written by Mr.
Azarov, Minister of Finance, and it effectively confiscates the natural gas
production of Cardinal's subsidiary, Carpatsky Petroleum, a U.S.
corporation.

This harms Cardinal and will also prevent other western companies who would
like to operate in the sector from working with Ukrainian State oil and gas
companies as they can not sell joint production.

USUBC: Please tell us about the situation with gas prices in Ukraine today.

ROB BENSH: The price for the gas for the population is established by the
special National Energy Price Regulation Authority is fixed:

265.00 UAH (excluding VAT) = 52.48 USD per 1000 m3 = $1.52/mcf
318.78 UAH (including VAT) = 63.12 USD per 1000 m3 = $1.83/mcf

The market price is to a great extent regulated by the price for gas
provided by Ukrgasenergo, the monopolist gas provider in the Ukrainian
market. The current price for gas in Ukraine is:

708,00 UAH per 1000 m3 (excluding VAT) = 140,20 USD

per 1000 m3 = $4,07/mcf
850,00 UAH per 1000 m3 (including VAT) = 168,30 USD

per 1000 m3 = $4,88/mcf

This price can be slightly more or less, when the gas is sold to the gas
trader and not to the end buyer directly, but it can't be higher at this
moment, though there's a good chance and a clear tendency for the future
increase.

USUBC: What actions has Cardinal taken to try and resolve this important
issue?

ROB BENSH: Cardinal has taken the following actions:

1. Letters requesting a resolution of the gas sales situation were sent to
the Prime Minister Yanukovich (December 19th, 2006), Energy Minister Boiko
(March 23, 2007), and the Head of NAK Naftogas Bakulin (May 20, 2007).

Only once have we receiving a response, and that was from the Deputy Energy
Minister, which gave us false hope that the situation with the gas sales
could be resolved. This was the response to our letter sent to the Prime
Minister. We've never received any responses to the other letters.

2. U.S. Ambassador William Taylor sent a letter to Energy Minister Boiko
(March20, 2007), asking for resolution of this issue for Cardinal. The
Minister never responded to that letter.

3. Cardinal has met with the Energy Minister Boiko twice in his office,
discussing this issue. Both times the Minister promised to consider the
problem and help to resolve it. There was never anything beyond the
promises.

USUBC: Based on your experience so far trying to resolve this critical
issue what conclusions have you drawn about the matter:

ROB BENSH: After several months of working on this problem we have
drawn the following conclusions:

1. Much stronger action must taken by all those who are concerned about the
very negative actions taken by the Ukraine government. Cardinal will not be
able to change the current situation alone.

2. We realize that this is not exclusively Cardinal's problem, but the
problem of every JAA or JV, formed with NAK Naftogas, Ukrnafta or
NAK Nadra.

Every declaration of any JAA or JV of their potential possibility to sell
gas at market price, when they have production, is a bluff. All existing
JAAs and JVs with production either sell the gas to NAK at below

production costs or put it into storage.

3. We have regularly made the point in our letters to the Government, that
the Laws, which created the current situation, directly contradict other
Laws of Ukraine, including the Civil Code, The Law "On Foreign Investment",
etc., which are still in effect.

Indeed, in April, Europa Oil and Gas (Holdings) plc won their case in court
of the right to sell gas at market prices but the government continues to
ignore the court ruling.

Cardinal assumes the verdict regarding the priority of the laws can be given
by the Constitutional Court. But considering the political situation in the
country, the fact that the mentioned court is not able to issue the decision
on one Presidential Decree for more than two months, we can hardly count
on this option.

4. Given the non-responsive nature of Minister Boiko to the Ambassador's
first letter, Cardinal has asked the U.S. Government to communicate via a
formal demarche to the Government of Ukraine that Decree 31 is inconsistent
with:

(a) global norms for encouraging foreign direct investment
(b) WTO standards and
(c) Government of Ukraine statements regarding "energy
self-sufficiency"
(d) Laws Governing Foreign Investment in Ukraine.

Ideally we would like to see the Yanukovich government voluntarily withdraw
this law which is contrary to the long term interests of Ukraine and its
people. Given their lack of response so far to our requests and to those of
the U.S. Ambassador, we doubt they are willing to do the right thing.

At this point, for the sake of future foreign direct investment in Ukraine
and for Ukraine's efforts in the direction of energy independence, we can
only hope that the September 30 elections bring about a change in the
direction of welcoming investment from the West.

In the interim, we will continue to ask the U.S. government for its
intervention in the form of a demarche to Prime Minister Yanukovich.
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[return to index] [Action Ukraine Report (AUR) Monitoring Service]

========================================================
2. THE WORLD BIOFUEL BOOM AND UKRAINE -
HOW TO REAP THE BENEFITS, Policy Paper No. 7

Letter-to-the-Editor: By Dr. Heinz-W. Strubenhoff
Institute for Economic Research and Policy Consulting
German-Ukrainian Policy Dialogue in Agriculture
Kyiv, Ukraine, Thursday, August 9, 2007

RE: Article 14. Introducing Biofuel
How to launch this alternative mechanism?
By Natalia BILOUSOVA, The Day Weekly Digest #20
Kyiv, Ukraine, Tuesday, July 10, 2007
Action Ukraine Report (AUR) #856, August 9, 2007

Dear Sir,

Thank you very much for keeping us on your mailing list.

Article 14 deals with biofuels in Ukraine. It is interesting to read but
strongly biased by lobby interests. Our view differs.

See attached two policy papers on biofuels in Ukraine [The World
Biofuel Boom and Ukraine - How To Reap The Benefits, Policy
Paper No. 7 and Comments on the Draft Law of Ukraine No. 3158,
"On biological fuels production and consumption development].

The Executive Summary of No. 7 gives an overview on our reasoning
and findings. You may use it for publishing if you wish.

Best Regards

Dr. Heinz-W. Strubenhoff
Institute for Economic Research and Policy Consulting
German-Ukrainian Policy Dialogue in Agriculture
------------------------------------------------------------------------------------------
THE WORLD BIOFUEL BOOM AND UKRAINE -
HOW TO REAP THE BENEFITS, Policy Paper No. 7
Institute for Economic Research and Policy Consulting
German-Ukrainian Agricultural Policy Dialogue
Kyiv, Ukraine, 2007

EXECUTIVE SUMMARY
High world energy prices, the dependency of many countries on energy
imports and the increasing awareness of the effects of global warming have
put biofuels high on the political agenda.

This paper is aimed at analysing the economics of biofuel production, and
the impact it has on world energy markets on the one hand and on world
agricultural markets on the other. Furthermore, three policy options on
how Ukraine can best benefit from this biofuel boom are discussed.

This paper focuses on biodiesel and bioethanol, which are produced mainly
from vegetable oil and grain or sugar, respectively. These biofuels are
already established and referred to as the first generation of biofuels.
This compares to second generation biofuels like ethanol from straw or
BTL (Biomass to liquid), which are not established.

The competitiveness of biodiesel compared to diesel produced from crude oil
depends on a number of factors, of which the price of crude oil is the most
important one. Net of any subsidies or tax breaks, biodiesel competes
directly with fossil diesel. Given a certain level of production costs, a
maximum bidding price can be calculated for rapeseed. This is the maximum
price a biodiesel producer can bid for rapeseed without running a loss.

Assuming, for example, a crude oil price of 60 US$/barrel (bbl) and a price
for rapeseed meal of 160 US$/t, the maximum price a biodiesel producer
could pay for rapeseed is approx. 200 US$/t, which is well below the current
market price in Ukraine.

In the period between 2001 and 2006 the maximum price that biodiesel
producers were able to pay for rapeseed never reached the market price, even
at crude oil prices of almost 80 US$/bbl. Thus, biodiesel production has
never been competitive without subsidies.

The same calculation can be applied to ethanol production by calculating the
maximum bidding price for grain. At crude oil prices of 60 US$/bbl and a
price for the protein-rich by-product DDGS of 80 US$/t, the maximum bidding
price for corn in Ukraine would be approx. 70 US$/t. This is again well
below the current market price.

Looking back into the 2001 to 2006 period bioethanol production from grain
would have been competitive in Ukraine only in summer 2005. At that time
high crude oil prices were accompanied by very low grain prices in Ukraine.
However, bioethanol would not have been competitive without subsidies
most of the time.

Biofuels can substitute only a small share of the world’s energy use. Even
if all vegetable oils produced in the world were converted into biodiesel,
they would substitute less than 3 % of world crude oil use. Their current
market share is estimated to be even much lower at 0.2 to 0.3 % of world
crude oil consumption, or approx. 0.5 % of all transport fuels used in the
world.

If all grain in the world were converted into bioethanol it could
substitute approx. 11 to 13 % of crude oil in the world or approx. 25 % of
the crude oil used for transport, but would leave nothing for food or feed.
Currently, ethanol produced from grain and sugar together substitutes
approx. 0.8 % of the world's crude oil use.

These figures show that the world crude oil market is very big and that any
amount of biodiesel or bioethanol produced can hardly substitute a
significant share of crude oil demand. The impact of first generation
biofuels on the world crude oil markets is therefore limited. Biofuels of
the second generation will add to this potential. Its is rather unclear,
however, how competitive they will be.

In contrast, the impact that world energy markets have on the grain and
oilseed markets is substantial. Although a limited amount of the world
vegetable oil supply of less than 8 % is used for biodiesel production, this
additional demand is difficult to meet. This is why prices for vegetable
oils and oilseeds have been skyrocketing recently. The same holds true for
the grain market.

In the current 2006/07 marketing year the world grain use will exceed the
world grain production by almost 75 mln t, thus leading to a depletion of
stocks of this magnitude. Exactly this amount of grain, i.e. 75 mln t, is
used for ethanol production. As world ending stocks will fall to a very
low level, prices for grain have risen to a ten-year high.

The record prices paid for agricultural products on the world market are
very good news for Ukraine, a country with a big agricultural sector and an
even bigger untapped agricultural potential. Ukraine is in the excellent
situation to benefit from the world biofuel boom without paying any subsidy
for it. In a way, Ukrainian farmers benefit to a great extent from the
subsidies paid in the EU, the US and other countries to produce and

consume biofuels via record high prices.

This could provide the necessary incentives for farmers in Ukraine to
increase their productivity and production and to overcome the deep crises
it experienced.

For this to happen it is absolutely necessary that the Ukrainian government

does not interfere in the market, letting farmers profit from high world

market prices.

In the end, the Ukrainian government will benefit, too, via higher income
taxes and the reduced pressure to subsidise the agricultural sector.

A biofuel strategy for Ukraine needs to take this into account. Basically,
Ukraine has three options:

a. to follow a free market approach.
b. to foster biofuel production in Ukraine for exporting.
c. to foster domestic production and the use of biofuels.

The free market approach would mean that biofuel production and consumption
would not be subsidised. Instead, the government would provide a good
investment climate, promote the development of internationally consistent
standards and fund technical and socioeconomic research. It would be up to
each investor to decide whether it is profitable to produce and/or to sell
biofuels in Ukraine.

It remains to be seen whether Ukrainian ethanol would be competitive on
the world and domestic market. It competes directly with ethanol produced
from sugarcane in Brazil and elsewhere in the world, and productions costs
of ethanol from sugarcane are generally much lower than ethanol from grain.

The biofuel production and export strategy would entail direct subsidies for
the production of biofuels to reduce the cost of production. It is also
being debated in Ukraine whether even more export restrictions, for rapeseed
for example, should be established. This is discussed to reduce the price
biofuel producers would need to pay for rapeseed as a feedstock for
biodiesel production.

The domestic production and consumption approach would mean active
subsidisation of biofuel production and consumption via tax exemptions,
mandatory blending rules or direct subsidies to biofuel producers. Thus,
Ukraine would use the German policy as a guideline.

As biofuels are currently not competitive with fossil fuels, their
production and use needs to be subsidised in one way or another to bridge
the gap between crude oil prices and biofuel prices. This subsidy will
either be paid by the taxpayer, the consumer or the farmers, and the costs
are high. In Germany, for example, the mandatory blending of biodiesel into
fossil diesel of only 5 % leads to higher fuel prices.

Additional expenses incurred by the consumers, i.e. the car drivers, amount
to 800 mln to 1 bln Euro a year. Plans in Ukraine to impose an export tax
on rapeseed would reduce the selling price achieved by farmers, thus
reducing the incentive to improve productivity and increase production.

The cost of any support for the biofuel industry needs to be weighed against
its benefits. Biofuel production may reduce Ukraine’s energy dependency.
However, the costs are relatively high and it needs to be carefully
investigated whether biofuel production is the cheapest way to reach this
goal.

It is well known that Ukraine's energy intensity, i.e. the amount of
energy used for a unit of GDP, is among the highest in the world. Thus,
producing expensive biofuels just to use them very inefficiently in outdated
technology is not a very clever strategy. Furthermore, biofuels can reduce
CO2 emissions. But again, they are a rather expensive way to achieve this
goal.

Biofuels can also create jobs. Indeed, this is why they seem to be so
attractive for many policy makers in the EU. However, the number of jobs
created is often rather small and exaggerated by the proponents of biofuel.

Biofuel production is capital intensive, not labour intensive. Additional
jobs created in the agricultural sector will also be created if Ukraine
follows a free market approach. And, not least, any subsidy can destroy
jobs, as it represents additional costs in other parts of the economy.

Therefore, a macroeconomic cost-benefit analysis is needed to assess
properly the impact biofuels would have on the economy in general, on jobs,
energy dependency and, not at least, on the environment.

Thus, biofuel production and use is feasible in Ukraine, but the economic
cost would be very high. On the other hand, Ukraine is in a very comfortable
position. It could be one of the major beneficiaries of the world biofuel
boom by doing nothing but helping farmers to benefit from the high world
agricultural prices and exporting agricultural products.

Ukrainian academics have long debated the problems created by the price
scissor, i.e. low prices for agricultural products but high prices for
agricultural inputs. This problem could simply vanish, thanks to the biofuel
boom elsewhere in the world.
--------------------------------------------------------------------------------------------------
Disclaimer: This paper was prepared by the authors using publicly available
information and data from various Ukrainian, EU and WTO sources. All
conclusions and recommendations included in this article in no circumstances
should be taken as the reflection of policy and views of the German Federal
Ministry of Food, Agriculture and Consumer Protection.
-------------------------------------------------------------------------------------------------
NOTE: To read the entire Policy Paper No. 7, World Biofuel Boom and
Ukarine or the paper Comments on the Draft Law of Ukraine No. 3058,
"On Biological Fuels Production and Consumption Development" go to
http://www.ier.kiev.ua/English/papers/papers_eng.phtml or write to your
editor, Morgan Williams, morganw@patriot.net, and I will send you a copy.
-------------------------------------------------------------------------------------------------
Dr. Heinz-W. Strubenhoff, Institute for Economic Research and Policy
Consulting, German-Ukrainian Policy Dialogue in Agriculture
Reyterska 8/5 A, 01034 Kyiv
Tel. office (+38044)235-7502, 278-6360
Tel. mobile (+3)8-0955 211 625
strubenhoff@ier.kiev.ua; www.ier.kiev.ua

------------------------------------------------------------------------------------------------

[return to index] [Action Ukraine Report (AUR) Monitoring Service]
========================================================
3. EBRD PROJECT SUMMARY WITH UKRAINE'S UKRTRANSNAFTA

Ukrtransnafta Project Summary Document (PSD)
European Bank for Reconstruction and Development (EBRD)
London, United Kingdom, Friday, August 10, 2007

LONDON - Ukrtransnafta project description and objectives: The proposed
project consists of USD 65 million in modernization improvements for
Ukrtransnafta, the Ukrainian State oil transportation company. The main
components are fourfold:

1) Installation of oil metering units to implement oil quality testing in
accordance with international standards;
2) Optimization and expansion of the existing oil storage terminal at
Pivdenny for greater efficiency and security of supply;
3) Installation of a microprocessor system for automating oil pipeline
network management to ensure accident free operation and
environmental protection and;
4) Communications network modernisation to improve system reliability.
All procurement will be carried out according to EBRD public sector
procedures.

Transition impact: The project will be the first International Financial
Institution facility for Ukrtransnafta and is designed to modernise and
improve the efficiency and reliability of the oil transportation system of
Ukraine.

The improvements also impact positively on security of supply and transit.
The project will also introduce international procurement standards and
requirements.

The client: Ukrtransnafta is a Joint Stock Company 100% owned by the
State oil and gas company, National Joint Stock Company Naftogaz
Ukraine. Ukrtransnafta is charged with the operation, maintenance and
development of the State oil pipeline network which remains State property.

EBRD finance: USD 65 million Senior Corporate Loan.

Total project cost: The project is part of Ukrtransnafta’s overall capital
expenditure programme projected to be USD 200 million during the
disbursement period.

Environmental impact: The project was screened B/1. Environmental due
diligence is still underway. Nevertheless the results of all the independent
investigations, including a site visit by the Bank’s Environment and
Sustainability Department, confirm that the Pivdenny Tank Farm has been
constructed and is operated to a very high standard, in line with best
international environmental, health and safety requirements.

The tanks are all relatively new, double skinned with floating roofs to
minimise vapour losses. The location is remote from other buildings and fire
and spill protection is of a high standard. The planned new storage tank
will be built to the same high standard of environmental, health and safety.

Technical cooperation: A feasibility study was financed by the EU under the
INOGATE IFI Due Diligence Support Facility Framework Agreement.

Project Summary Documents are created before consideration by the EBRD
Board of Directors. Details of a project may change following disclosure of
a Project Summary Document. Project Summary Documents cannot be
considered to represent official EBRD policy.
---------------------------------------------------------------------------------------------
LINK: http://www.ebrd.com/projects/psd/psd2007/37476.htm
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[return to index] [Action Ukraine Report (AUR) Monitoring Service]

========================================================
4. NAFTOHAZ SPOILT BY PETROLEUM PRODUCTS
Ukrainian cabinet said to prepare oil company for privatization

By Oleh Havrysh, Vitaliy Selik and Ivan Hech
Kommersant-Ukraina, Kiev, in Russian 9 Aug 07 p 5
BBC Monitoring Service, United Kingdom, Sat Aug 11, 2007

The Cabinet of Ministers of Ukraine has transferred the state shares in the
Ukrtatnafta oil company from the Naftohaz Ukrayiny state oil and gas

company to the State Property Fund. Experts see this as a move to privatize

the company next year.

The following is the text of the article by Oleh Havrysh, Vitaliy Selik and
Ivan Hech entitled "Naftohaz spoilt by petroleum products" published in the
Kommersant-Ukraina daily on 9 August:

Yesterday the Cabinet of Ministers passed a resolution transferring the
state's stake in Ukrtatnafta [Ukrainian-Tatarstan Oil] to be managed by the
State Property Fund [SPF].

This is extremely advantageous to the Tatar shareholders in the enterprise,
since it deprives their basic opponent - the NJC [National Joint-stock
Company] Naftohaz Ukrayiny [Ukrainian state oil and gas company] - of the
possibility of fighting to re-establish control of Ukrtatnafta.

Experts believe that by obtaining control of the enterprise, as early as
next year the Cabinet of Ministers will put up its stake for privatization.

Ukrtatnafta controls about 35 per cent of the Ukrainian petroleum market.
Its turnover in 2006 was 700m dollars and net profit 5m dollars. Ukraine
owns 43 per cent of the stock in the plant, which, up to now, was run by the
NJC Naftohaz Ukrayiny, the government of Tatarstan (28.8 per cent) and
Tatneft [Tatar oil] (8,6 per cent). There is a dispute between Ukrainian and
Tatarstan shareholders over another 18.3 per cent of the stock.

The draft resolution on the transfer of 43 per cent of the stock in
Ukrtatnafta from Naftohaz to the SPF at yesterday's sitting of the
government was tabled by the first deputy minister of the Cabinet of
Ministers, Volodymyr Pavlenko.

Fuel and Energy Minister Yuriy Boyko spoke against the resolution in its
current form. He said that with the transfer of 43 per cent of the stock of
Ukrtatnafta, the government was recognizing the loss of control over 18 per
cent of the enterprise's stock.

As a result, the cabinet took a decision to transfer shares in Ukrtatnafta
to the SPF without indicating the size of the stake. The number of shares
will be determined by a working group in the next two weeks, Economics
Minister Anatoliy Kinakh specified.

The head of the SPF, Valentyna Semenyuk, explained the government decision
by the need to settle a conflict with Tatarstan. One needs to be a bit more
precise with foreign investors, and that is why the plant was handed over to
us, Semenyuk explained. People in Tatneft said that they considered the
transfer of the Naftohaz shares to the SPF as a favourable sign.

Naftohaz was surprised by the government decision. We will carry it out,
even though we consider it illogical. Our company has great experience in
working on the petroleum market. By controlling Ukrtatnafta, we could have
exerted influence on market prices with the help of commercial
interventions, the company's press service says.

The general director of the Halychyna oil company, Oleksandr Lazorko,
believes that the decision to transfer the stake in the enterprise
essentially removes Naftohaz Ukrayiny from the struggle for control of
Ukrtatnafta and thereby is advantageous to the Tatarstan shareholders.
Naftohaz has capacities for oil extraction in the form of Ukrnafta
[Ukrainian Oil] as well as a network of filling stations.

The company's fight for control of Ukrtatnafta was explained by the desire
to unite all those capacities and create a vertically integrated oil company
on the basis of Naftohaz, Mr Lazorko says.

Now Naftohaz will not be able to take part in the struggle for the stake in
Ukrtatnafta. And the SPF, judging by its experience of running state stakes
in oil refineries, will also not intervene in the work of the enterprise.

A deputy of the Supreme Council [parliament] of the 5th convocation,
Mykhaylo Volynets, who is a member of the fuel and energy committee,
believes that the transfer of the stake in Ukrtatnafta to the SPF
essentially means the start of preparation for privatization of the
enterprise.

By having prepared the transfer of the stake to the SPF, the cabinet has
made it possible to sell the stake in Ukrtatnafta as early as next year,
Volynets says.

There are no longer any other major facilities for privatization in the area
of oil refining. In the opinion of Volynets, the majority of the country's
oil companies may take part in the privatization of Ukrtatnafta if, of
course, it is a matter of 61 rather than 43 per cent. In the assessment of
market participants polled by Kommersant, the value of a 61 per cent

stake in Ukrtatnafta may amount to 500-600m dollars. -30-
------------------------------------------------------------------------------------------------

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5. HOLTEC TO START COMPLETION OF NUCLEAR WASTE

STORAGE FACILITY AT CHORNOBYL NPP IN AUGUST

Interfax Ukraine Energy Weekly
Kyiv, Ukraine, Sunday, Aug 12, 2007

KYIV - U.S. Holtec International in August is to start the completion of the

building the second nuclear waste storage facility at the Chornobyl NPP,

which is needed for the decommissioning of the plant, the informational

and analytical group of the state Chornobyl NPP company has reported,

referring to the head of the group for managing projects on

decommissioning of the Chornobyl NPP, Andriy Chatsman.

The group said that on August 3, 2007 the documents, which allow Holtec to
start preparation works, were signed.

"Of course, we're interested in resuming works at the object, which is very
important for decommissioning of the Chornobyl NPP, as soon as possible,

as well as the second nuclear waste storage facility, and with the approval of
the European Bank for the Reconstruction and Development, we signed the
documents before the basic contract is signed," the group said, citing
Chatsman.
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6. UKRAINIAN ELECTION COMMISSION REFUSES OPPOSITION
PARTICIPATION IN ELECTIONS; TYMOSHENKO CALLS FOR
SUPPORT FOR DEMOCRATIC PROCESS IN UKRAINE

Press Release, BYuT, Kyiv, Ukraine, Saturday, Aug. 11, 2007

KYIV - The Ukrainian Central Election Commission (CEC), which is
responsible for overseeing the electoral process associated with the
Ukrainian parliamentary elections scheduled for September 30th , has
refused to register the main opposition coalition led by former Prime
Minister Yulia Tymoshenko.

Early Saturday morning the CEC members who represent Prime Minister
Viktor Yanukovych, along with his communist and socialist allies, refused
to give their vote acknowledging the candidacy of all 450 nominees of the
opposition coalition of Bloc Yulia Tymoshenko (BYuT).

Ms. Tymoshenko said the decision by the CEC to reject all BYuT candidates
was a politically motivated attempt to disrupt the upcoming elections.

The official reason given by the CEC was that the candidates of Tymoshenko’s
party did not state their full address (house number, street name) in the
registration documents.

Citing a Constitutional Court ruling in 2000, Tymoshenko said the place of
the residence is defined as a name of a village, city or region, but not a
specific street address. She added that the BYuT candidacy documents were
completed in exactly the same manner during the 2006 parliamentary elections
without any question.

"This is a blatant and rather desperate attempt to undermine the electoral
process by eliminating a political party that represents one-third of the
country’s population. " said the opposition leader.

Tymoshenko pledged to appeal to the courts on Saturday and requested
immediate reaction from her political partners – President Viktor Yushchenko
and his coalition Our Ukraine-People’s Self Defence.

She also said that her coalition would seek support from the European Union,
the Council of Europe, PACE and OSCE.

The Ukrainian parliamentary election campaign started on August 2; the vote
is scheduled for September 30.
-------------------------------------------------------------------------------------------
BYuT FOOTNOTE: The Central Election Commission - where majority
belongs to the representatives of the ruling coalition - at its dramatic
midnight voting refused to register the BYuT list for the elections. Formal
reason was "discrepancies in the list and bios of all 450 candidates".

It means that while in the list there were only "place of living" i.e. city,
town or village, in the bios there were exact address. BYuT's documents
were presented according to the same standards as in the last parliamentary
elections. There were no differences this time.

But politically biased members of the CEC "interpreted" the norm in a new
and very specific way. Deadline for the registration expired at the
midnight. Effectively it means that the BYuT has been excluded from the
campaign.
Separately, to understand the sequence of events:
On Friday, August 11, 2007, the Central Election Commission (CEC), the
state body responsible for administering the elections in Ukraine, refused
to register the major opposition coalition in Ukraine, Bloc Yulia Tymoshenko
(BYuT), for the parliamentary elections scheduled for September 30th.

Specifically, the CEC members who were elected under a quota system to
represent the current governing coalition of Prime Minister Yanukovich’s
Party of Regions, the Socialists and the Communists, refused to recognize
the legitimacy of any of the 450 BYuT candidates. This is, from the point
of view of Yulia Tymoshenko and BYuT, a violation of the laws of
Ukraine and the universal principles of democracy.
SUMMATION OF EVENTS:
On August 7, 2007, according to part 1, article 58 of Ukraine’s law “On
The Election of People’s Deputies of Ukraine ”, BYuT applied to the
CEC for registration of its candidates for the parliamentary elections
scheduled on September 30.

All required documents were completed and submitted according to the
law and were consistent with the precedent followed in the parliamentary
elections of 2006.

According to part 3, article 102-4 of Ukraine’s law “On The Election of
People’s Deputies of Ukraine” the CEC then had three days after the initial
application to render its decision regarding the registration.

As of midnight, Aug 10, 2007, CEC members associated with the
ruling coalition refused to vote (abstaining) to officially register the
candidates of BYuT and therefore missed the legally prescribed deadline
described above.

The official reason provided by the governing coalition CEC
members was that the candidates of BYuT did not state their full address
(house number, street name) in the registration documents, citing article 29
of Ukraine’s Civil Code. In fact, Ukraine’s Civil Code has no relation to
participants of elections; it simply defines in general terms for civil law
the place of residence of a natural person.

Further, in article 3 of Ukraine’s law “On Freedom of Movement and
Freedom of Choice of The Place of the Residence in Ukraine”, the
place of residence is defined as the name of a village, city, etc, where
a person lives more than six months.

Additionally, the Constitutional Court ruling No 10-? of Sept 28, 2000,
determined the place of residence of a person as the name of the village,
city, etc, but not a specific house or apartment.

Lastly, by way of precedent, during the 2006 parliamentary elections, BYuT
candidacy forms were completed in exactly the same manner as they are for
the 2007 parliamentary elections

Therefore, the CEC determination in the matter of the BYuT candidates is
strictly defined (1) according to the law of Ukraine described above, (2) by
a separate ruling of the Constitutional Court on September 28, 2000 and, (3)
by established by precedent of the 2006 parliamentary elections.
-----------------------------------------------------------------------------------------------
For further information, please contact TD International, the FARA-
registered representative of Ms. Tymoshenko and BYuT, at
(202) 872-9595.
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========================================================
7. BYuT PARTY BARRED FROM UKRAINE POLL

By Roman Olearchyk in Kiev
Financial Times, London, United Kingdom, Monday, August 13 2007

Ukraine's ability to ease its long-standing political paralysis was cast
into further doubt at the weekend when its leading opposition party was
barred from taking part in September's snap parliamentary election.

Ukraine's Central Election Commission refused to register BYuT, the
political bloc led by Yulia Tymoshenko, the former prime minister, on the
grounds that it had failed to provide the exact addresses of its candidates,
a requirement not clearly set by election laws.

The development comes only days after Ukraine's pro-western president,
Viktor Yushchenko, insisted the vote would be free and fair. The early poll,
to be held on September 30, follows a compromise deal struck in May between
Mr Yushchenko and his arch-rival, Viktor Yanukovich, the prime minister,
ending a two-month constitutional standoff.

The election commission is split on party lines. BYuT's registration was
blocked by a majority of commission members loyal to Mr Yanukovich's
coalition.

"This is a blatant and rather desperate attempt to undermine the electoral
process by eliminating a political party that represents one-third of the
country's population," said Ms Tymoshenko, who promised to challenge the
move in court.

Mr Yanukovich's camp suggested that Ms Tymoshenko had deliberately filed
incomplete documents in order to raise a stir that would rally her
supporters.

Mr Yushchenko's administration defended BYuT - lying second behind Mr
Yanukovich's Regions party in opinion polls - saying its application was in
compliance with election laws.

Political analysts in Kiev predict more intrigue, but expect elections to
proceed on schedule, with BYuT gaining permission to participate through a
court ruling.

Less certain is whether the new parliament will bring political stability.

If elections are held, Regions and BYuT are expected to garner 25 to 35 per
cent support. Trailing in third place, Mr Yushchenko's camp is positioned to
act as kingmaker between Mr Yanukovich and Ms Tymoshenko, who had a
bitter falling-out with the president in 2006.

The three leaders are expected to spar for the presidency in 2009. Most
Ukrainians support Mr Yushchenko's European Union membership agenda,
but remain split over language and foreign policy.

Eastern regions backing Mr Yanukovich oppose Mr Yushchenko's Nato
membership aspirations, seek close ties with Moscow and want Russian
recognised as a second state language.

Ukrainian-speaking western regions back Ms Tymoshenko and Mr
Yushchenko over Mr Yanukovich, whom they view as a Moscow loyalist.

Mr Yushchenko could seek a broad coalition, squeezing smaller leftwing
parties into the opposition. Ms Tymoshenko has pledged not to enter into a
coalition with Mr Yanukovich, whose big business-backed party she has
dubbed a "mafia".
----------------------------------------------------------------------------------------------
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8. UKRAINE ELECTION PANEL REFUSES TO REGISTER

MAIN OPPOSITION CANDIDATES

Associated Press (AP), Kiev, Ukraine, Saturday, August 11, 2007

KIEV, Ukraine - Ukraine's elections commission on Saturday refused to
register a main opposition grouping's candidates for next month's
parliamentary elections, raising new tensions in the country's crisis-prone
politics.

The early parliamentary elections called for Sept. 30 defused a monthslong
confrontation between pro-Western President Viktor Yushchenko and his
Russian-leaning foe Prime Minister Viktor Yanukovych that broke out after
Yushchenko ordered the parliament dissolved.

But the rejection of candidates from the Bloc Tymoshenko group likely would
raise wide questions about the election's legitimacy. The bloc's leader,
Yulia Tymoshenko, is highly popular; recent polls have shown the bloc
attracting about the same level of support as Yushchenko's Our Ukraine.

A Central Elections Commission spokesman, who declined to be named,
confirmed the rejection, but didn't give details, saying he wasn't
authorized to speak to the news media.

Tymoshenko in a statement called the move illegal, saying the candidates
were refused registration because they had failed to provide their full
addresses. She said the bloc's registration was stalled by commission
members loyal to Yanukovych. "These marionettes have just fulfilled

Yanukovych's direct order," Tymoshenko said.

Ukraine's politics have been beset by an array of troubles since the 2004
Orange Revolution - the massive protests that broke out after fraud-plagued
presidential elections in which Yanukovych was declared to have tallied the
most votes. Yushchenko won a court-ordered rerun.

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========================================================
9. OPPOSITION ERECTS TENTS IN UKRAINIAN CAPITAL

TO PROTEST DENIAL OF ELECTION REGISTRATION

Maria Danilova, AP Worldstream, Kiev, Ukraine, Sunday, Aug 12, 2007

KIEV - Ukraine's main opposition force erected a tent camp in the center of
the capital Sunday, protesting authorities' refusal to register its
candidates for next month's parliamentary elections.

The Central Election Commission on Saturday declined to register candidates
from the Bloc Yulia Tymoshenko group because the party had failed to state
its members' exact addresses, raising new tensions ahead of the vote.

About 1,000 activists from Tymoshenko's bloc clad in white T-shirts
displaying the bloc's logo - a red heart - rallied outside the commission
building in downtown Kiev. They put up more than 100 tents and said they
would stay until they obtain the reversal of the decision, which they called
politically driven.

The early parliamentary elections set for Sept. 30 defused a monthslong
confrontation between President Viktor Yushchenko and his foe Prime Minister
Viktor Yanukovych that broke out after Yushchenko ordered the parliament
dissolved. But the refusal to register Tymoshenko's bloc - the leading
opposition force - is likely to raise questions about the legitimacy of the
vote.

Ukraine's stability is of interest both to the Kremlin and to the West, with
Yushchenko pushing for Ukraine to join NATO and the European Union while
Yanukovych is more oriented toward Russia.

About half of the Central Election Commission Members are loyal to
Yanukovych, and Tymoshenko has accused him of being behind the decision.

She vowed to contest it in the courts.

Yanukovych's Party of Regions has rejected Tymoshenko's allegations and
alleged that she was stirring up tensions in order to boost her popularity.

Tymoshenko's supporters vowed to maintain their vigil outside the election
commission's office until it agrees to register the bloc's candidates.

"Bandits ... have denied half of Ukraine the right to vote," said Yuriy
Klimovits, a 70-year-old retiree from western Ukraine wearing a white
baseball hat emblazoned with the party's logo.

"Until they reverse their decision we will stand here, we will stand till
victory," said Olha Zhurba, a 68-old Kiev pensioner.

Tymoshenko's bloc got support Sunday from Yushchenko's Our Ukraine-

Our Self-defense party, which protested the denial of registration and urged

the election commission to reverse its move.

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========================================================
10. THE PARTY OF REGIONS' CONGRESS: STRENGTHENING THE
YANUKOVYCH-AZAROV-KLYUYEV AXIS - THE LIST AND
PROGRAMME OF THE 'REGIONALS'- A CORRECTION OF
THE STATUS QUO, Writer analyzes electoral list of ruling party

ANALYSIS & COMMENTARY: By Oleksiy Popov
Source: 2000, Kiev, in Russian 10 Aug 07
BBC Monitoring Service, United Kingdom, Sun, Aug 12, 2007

Ukraine's ruling party has not changed its election list much, despite some
media predictions to the contrary, a newspaper has reported. The author
detailed the list in terms of candidates alleged loyalties within the party
to current Prime Minister Yanukovych or influential party member Rinat
Akhmetov. He said that while names have changed, the balance of influence in
the party remains essentially the same.

The following is an excerpt of the article by Oleksiy Popov, entitled "The
Party of Regions' congress: strengthening the Yanukovych-Azarov-Klyuyev
axis - the list and programme of the 'Regionals' - a correction of the
status quo?" published in the Ukrainian newspaper 2000 on 10 August;
original subheadings retained:
Rumours around the block
There were so many rumours before the Party of Regions' congress predicting
that internal clashes in the party would lead to noticeable transformations
in the party list.

For example two days before the congress, Yuriy Romanenko wrote in
Ukrayinska Pravda: "Even if the Party of Regions wins the snap elections and
sets up a coalition with the Communist Party of Ukraine [CPU], [current
Prime Minister] Viktor Yanukovych will no longer have a clean slate for
forming his own team in the Cabinet of Ministers.

[Party of Regions members and Ukraine's richest man Rinat] Akhmetov is
firmly set on forming no less than 50 per cent of the list out of his own
people. [Borys] Kolesnykov (who, according to the article, Akhmetov is
lobbying for prime minister - A. P.) is trying to move Yanukovych's people
to the end of the list, and consequently, the latter is trying to do the
same thing.

Appearances of the draft of the Party of Regions list in the media are
indicative of this conflict. This draft alleges Akhmetov's people have been
moved down. A number of media outlets reported that [Andriy] Klyuyev is
behind organising the media. The appearance of such provocation is yet
another piece of evidence of strengthening antagonism within the Party of
Regions."

Lastly, about the so-called "Andriy Klyuyev list", published first on
RUpor.info a few weeks before the congress and disseminated by many other
media outlets.

This is a photocopy of a piece of paper on which 48 numbered surnames are
printed. And some of them were accompanied by arrows (up or down), questions
marks and other notes, supposedly made by Klyuyev's own hand.

Naturally, the Party of Regions called these articles provocation. And of
course anyone who knows his way around politics even just a tiny bit could
draw the same conclusion.

Because the following looked extremely suspicious: Rinat Akhmetov's absence
among the top 48 and an arrow from Borys Kolesnykov's number downwards, and
Taras Chornovil's name being scratched off (who by the way, is considered
closer to Klyuyev's group than to Kolesnykov's), and raising Oleh
Kalashnykov [the MP accused by journalists in 2006 of using force against a
cameraman] to spot number 46 from 161 in 2006, of course there is an arrow
downwards with an illegible note.

No less suspicious was the presence of Oleksandr Moroz, Vasyl Tsushko and
Mykola Rudkovskyy [members of the Socialist Party of Ukraine, which is the
Party of Region's partner in the coalition government and whose party many
pollsters say will not get into the next parliament], as well as the name of
Deputy Kiev Mayor Irena Kilchytska.

All of these singularities were quite obvious. And of course, this
provocation was not made up inside the Party of Regions, as the article
stated, but rather beyond its borders.

And many articles claiming to analyse the internal life of the Party of
Regions also appear to be provocative (albeit rather more delicate). But
does this excess of provocation and line-pushing mean there are no
contradictions or different centres of influence inside the party?

Certainly not, because that would contradict the very nature of politics.
And besides, the closed nature of the Party of Region's internal life
(something it shares with all the other political forces by the way) gives
additional ground for various rumours.
A quarter of new people while retaining the status-quo
The Party of Regions' list which was made public at the congress certainly
does very little to shed light on internal party politics, but it does give
a few answers to rumours on the magnitude and direction of changes inside
the party.

This list, like the lists of all leading political forces, can be divided
into three parts: those who will certainly get into parliament, those who
probably can make it and those who will not get in.

In the case of the Party of Regions, a "certain" part of the list is up to
number 150 inclusive, and a "possible" part is from 151 to 210. And numbers
in the second part up to number 180 or 190 can be considered "more likely"
(last time the party got 186 seats), and the next numbers can be considered
"unlikely".

Of course, if the Party of Regions remains in power, people even in the
second half of the list could get seats. But that remains to be seen when
the coalition is formed. And the coalition will be determined by those who
get into parliament at the beginning.

The position of the problematic numbers in the Party of Regions' list is
worse than it was in 2006, since at that time, the parliamentary election
was accompanied by elections to local government and some politicians who
got the right to an MP mandate chose to be a mayor or head of a regional
council.

That is what Anatoliy Blyznyuk, Mykhaylo Dobkin, Valeriy Saratov, Volodymyr
Demyokhin, Vasyl Salyhin and Serhiy Kravchenko did.

Naturally, those politicians are not in the list. Just as those who have
passed on like Yevhen Kushnarov, Anatoliy Antemyuk and Vasyl Biba, and like
re-elected ombudsman Nina Karpachova and Oleksandr Shelestov who has gone to
work in the Central Electoral Commission. Of course, Yuriy Smirnov is not on
the list - he was in the "certain" part of the list, but the Regionals
crossed him off back during the campaign.

And so objectively 12 vacancies appeared in the first 210 numbers, including
seven in the top 150 (we will not get into the depths of the
very-hard-to-get-it part of the list).

But noticeably more new faces appeared in the "certain" part of the list.
They number 39. That is to say the list has been updated by 26 per cent. And
only one "old lister", Vasyl Hrytsak - who recently became famous for
uncovering schemes to speed up the foreign passport process - got number 99
instead of 165 as in the last election.

But 16 members of the government and other structures - people who were not
only not in the 2006 Party of Regions' list - but most of whom were until
recently members of other parties - got guaranteed numbers in the list.

They are Inna Bohoslovska, Nestor Shufrych, Dmytro Tabachnyk, Oleksandr
Kuzmuk, Serhiy Lyovochkin, Yuriy Boyko, Anatoliy Kinakh, Oleksandr
Lavrynovych, Mykhaylo Papiev, Anatoliy Tolstoukhov, Andriy Derkach,
Oleksandr Popov, Volodymyr Yatsuba, Volodymyr Demishkan, Andriy Kravets and
Dmytro Kolesnykov. And Shufrych and Bohoslovska, placing in the top five,
have become the face of the Party of Regions.

We will not analyse the placement of the rest. It is clear a number could be
more or less flattering to any one of these politicians, but it plays no
role in getting an MP mandate if they are in the top 150. What is more
important is that all 16 of these members of the government can be called
loyal to Viktor Yanukovych rather than to Rinat Akhmetov.

In addition, there are eight people in this top 150 who come from other
factions, either they switched to the coalition, or they did not support
disbanding parliament: Oleksandr Volkov, Serhiy Holovatyy, Volodymyr Zubyk,
Vasyl Khmelnytskyy, Vasyl Hureyev, Pavlo Lebedev, Oleksandr Yedin and
Oleksandr Horoshkevycyh.

These people's presence also does nothing to increase the quota for Akhmetov
and Kolesnykov, since it was Klyuyev who did the practical work to widen the
coalition.

As for people not linked with the current parliament or government - there
are 15 of them in the guaranteed part of the list. Among them are MPs from
the previous parliament Hennadiy Vasylev (also a former governor), Valeriy
Konovalyuk, Nver Mkhitaryan and Ihor Plokhoy. As for the rest, information
on them is very hard to come by.

It is known that Yuriy Ivanyushchenko ran for the last parliament from
Renaissance and Mykola Soloshenko ran under Our Ukraine (number 122), from
which one can conclude that the latter belonged to the Ukrainian Party of
Industrialists and Entrepreneurs.

Completely unknown in politics are Ivan Myrnyy, Yuliya Novykova, Dmytro
Reva, Valeriy Kharlim, Serhiy Moshak, Dmytro Shpenov and Oleksandr
Suprunenko. Valeriy Bukayev is the president of the Luhansk football club
Zarya. Thanks to that fact, one can guess he is close to the leadership of
the Donetsk FC Shakhtar.

Finally, as for the director of the bureau of economic and social studies,
Iryna Akimova (number 63), the internet contains a lot of material on her as
a well-known economics analyst. And her own words about her company are
cited quite frequently: "Our organization was founded for the needs of the
SCM holding [System Capital Management - owned by Akhmetov], but many of the
products by our centre can be of use both to other companies and public
organizations".

So, one can say that at least two of the 15 new people in the Party of
Regions' list are close to Akhmetov. There are probably more, but members of
the government and those who switched to the coalition from other factions
number 23 in this part of the list and it is logical to file them under the
other group in the party.

But in order to understand how much the balance of power inside the Party of
Regions has changed, one has to know not only who got a guaranteed mandate,
but who lost one. And there are 31 such MPs.

One of them, Yevhen Lapin, is not running at all. Sixteen fell into the
"possible" part of the list - of course, 13 of them have good chances, being
in before number 180. These include three MPs who were in the top 100 in
2006 - Ihor Shkirya, Ihor Lisov and Hennadiy Samofalov.

Another 14 MPs of those who were in the top 150, ended lower than number
210. These include such well-known names as Anatoliy Kukoba, Volodymyr
Bronnykov, Oleh Panasovskyy, Volodymyr Pekhota and Volodymyr Zubanov. Many
of them still have a chance for a mandate if the Regionals remain in the
executive power.

The same cannot be said for Lyudmyla Kyrychenko who fell from place 46 to
404. Many parliamentarians who got difficult numbers have already reached
pension age. But it is doubtful they all wanted to make room for those who
are younger.

At the same time, not one MP who ran for the current parliament while
working for FC Shakhtar or the Lyuks company lost or lowered his chance for
getting re-elected. In addition to Akhmetov, there are six: Viktor
Prokopenko, Yuriy Kolotsey, Serhiy Kim, Volodymyr Malstev and Yevhen Heller.

To them may be added Ravil Safullin, the head of the professional football
league which is linked to Shaktar. Moreover, all of them either retained
their place on the list or improved it a few places, despite not being very
public. Meanwhile, most of the current MPs are in lower places than they
were in 2006.

And so the seven we have mentioned can calmly take the lead in the list over
such mouthpieces of the party as Mykhaylo Chechetov and Yuriy
Myroshchnychenko, who are placed 135 and 143, having lost ground by 23 and
eight points each.

Of course, these numbers guarantee they will get into parliament, but one
has to wonder whether such humble placement for people who often speak in
the name of the party means the real leaders of the Party of Regions care
little for what the two say.

However, in all fairness one must say Coal Industry Minister Serhiy Tulub,
who is considered one of the two people in the government close to Akhmetov
(along with Environment Minister Vasyl Dzharty), fell from 49 to 81.

Two people mentioned by Viktor Chyvokunya in the Ukrayinska Pravda article -
Vladyslav Lukyanov and Andriy Pinchuk - fell in the list (many of the
predictions in the article were justified at the congress and so information
on the internal party orientation of these two deserves trust). Lukyanov
fell from 133 to 155 and Pinchuk from 188 to 198.

And so both ended up in the "possible" part of the list, although Lukyanov
will probably have no trouble. In general, there are almost one-third of the
names from 151 to 210 in the list are new.

Of them, three are members of the executive - Serhiy Hlazunov, (deputy
minister of ecology), Serhiy Titenko (head of the National Energy Regulating
Commission) and Ihor Hlushchenko (head of the national Energy Company), the
last of these has the lowest position - 165, and so one can suppose all of
them will become MPs.

Another eight places in this part of the list have been given to those who
joined the coalition from other factions, but they are lower: Mykhaylo
Zubets (174), Oleksiy Fedun (177), Maksym Lutskyy, Oleh Nadosha, Valeriy
Kelestin, Volodymyr Oliynyk and Volodymyr Tolstenko (182 to 186). All of
these "former Orange" MPs will probably get into parliament, in contrast to
former socialist Oleksiy Kunchenko, who has number 203.

Another eight people in this part of the list have no relationship to the
current authorities or the outgoing parliament. Completely unknown are Yuriy
Moroko, Vasyl Stelmashenko, Vasyl Chunov, Denys Omelyanovych and Yuriy
Vayutin. The last four of them may have trouble getting mandates as they are
all lower than 190.

Yalta city council secretary Oleksiy Boyarchuk (187) runs the Crimean
headquarters and is considered close to the Party of Regions Crimea manager
Anton Pryhodskyy (and consequently - through him - to Viktor Yanukovych).
Meanwhile, two Irynas have the best chances of getting into parliament -
Horina (162) and Berezhnya (150).

The first dates from the "Winter crop" [a small party running in 2000]. The
second is a private notary in Kiev who recently gained fame all across the
country for sealing the results of [the One Plus One television show
competition] Dances with Stars. She has a detailed personal web-site, but
nothing is said on it about her political sympathies or internal party
inclinations.

As far as those Regionals who were in places 151 to 210 in 2006, only Vasyl
Hrytsak has moved up. Oleh Kalashnykov has not been included. Fewer than
one-half have remained in this zone, including such well-known names as
Yuriy Boldyrev, Ivan Popesku and Serhiy Ryzhuk. And half have had to move
into poor places, giving way to the newcomers. By the way, no especially
trustworthy information was published in terms of internal party influences
about those left out and those left in.

Overall, the additions and changes to the party list show no personnel
revolution took place. To the contrary, one can say the status quo has been
retained.

On one hand, most of the new people in the list are to a greater or lesser
degree Yanukovych's people. On the other hand, they appeared in the list at
the expense of anyone but those in Akhmetov's inner circle.

And anyway, speaking about the status quo in internal party politics is a
thankless task - something shown time and time again in Ukraine. Because
most politicians cannot be pinned to a formal or informal party leader for
good (in this case to Yanukovych, Akhmetov, Kolesnykov or Klyuyev).

The absolute majority of such politicians have no eternal friends or foes;
the direction they face unavoidably changes under the influence of many
factors - foremost the balance of power between the leaders of the party and
the country. [Passage omitted: Party programme.]
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11. PRESIDENT'S DEMAND TO REPEAL LEGISLATIVE IMMUNITY

Television Address: Official Website of President of Ukraine
Kyiv, Ukraine, Thursday, August 9, 2007

My fellow citizens,

I appreciate wide public support for my demand to repeal legislative
immunity. One million signatures will soon be collected to support this
call. I welcome the efforts and pledges by the Our Ukraine-People's
Self-Defense bloc to implement our initiative.

This will be a true crackdown on political corruption in the highest
echelons of government. This is a real means to cleanse the Verkhovna Rada
of dealers and moneychangers. Ukraine needs a parliament of professionals
who will make fair laws. Now those who hide from laws are also vying for
seats in it.

The nation must toughen its stance on the issue. I am resolutely calling on
all patriotic democratic forces, political parties and NGOs to support our
initiative.

Although important, the repeal of legislative immunity is only the first
step. Today I want to draw your attention to another problem which makes
Ukrainian legislators higher than the people and their needs. I am speaking
about their large-scale privileges, whose extent is impossible to imagine in
any European country.

The state must create good conditions for the work of its members of
parliament but not for their pleasure. Each year, the tax payers spend
almost UAH 500 mln on the privileges such as apartments, cars, sanatoriums,
medical and social bonuses.

This money could be used to pay off Ukraine's salary debt or build 250 new
schools or five new coalmines, or raise pensions by 20%. The comparison

of these sums is shocking.

I am speaking about this because I demand that politicians treat the
interests of the people fairly. The government must work to protect the
interests of the people, not politicians. We have one law for everyone. The
relapses of the Communist regime must be left in the past.

My simple priority is to repeal legislative immunity and some of the
privileges. I believe the people will support my demands. Together we will
make sure changes for which the nation is waiting will occur. You are
waiting for them. I am waiting for them. Step by step, we will make our
hopes come true.

Thank you for your attention.
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12. EARLY PARLIAMENTARY ELECTIONS IN UKRAINE:

FIRST SALVOS

ANALYSIS & COMMENTARY: Dr. Volodymyr Hrytsutenko,
Franko National University (Lviv)
Action Ukraine Report (AUR) #857, Article 12

Washington, D.C., Monday, August 13, 2007

With party conventions of the Regions, the Communists and the Socialists
held on August 4, and of the BYUT on Aug. 5, the political scene is now set
for campaign battles to open in earnest.

Hitherto, Ukrainians were aware of the coming electoral showdown seeing
scathing commercials masked as social advertising by political rivals. At
the Regions convention their leader lashed out openly at the president and
his camp of political parties.
FIRST SALVOS
Speaking, or rather reading from a state-of-the-art and costly display
invisible to the audience, fuming Regions leader Viktor Yanukovych sent a
strongly worded message to the opposition.

He started by bashing the Orangists (Our Ukraine and BYUT) for ruining the
economy in 2005-2007, fanning the rift between Eastern and Western
Ukrainians, kowtowing to NATO and Uncle Sam and turning its back on

Mother Russia.

Then he praised the savior of Ukrainians, his party, for its exemplary track
record in kick-starting economic recovery and raising pensions and salaries.
Finally, he promised mind-boggling stipends and benefits to students and
young professionals.

As the finance minister hails from the Regions, he readily confirmed that a
ten-fold increase in stipends and free apartments that all young
professionals will get on signing a 20-year job contract with the government
are no pipe dreams.

But there's the rub, as new housing is still to be built by local
governments for revenues from the sales of land. Moreover, local government
reform vesting it with more financial powers is some time away. Finally,
long-term job contracts may be viewed as fetters by aspiring young
professionals.

Understandably, Yanukovych said nothing about how his government had

imposed heavy cuts on social spending in the 2007 budget and how it finally

had to give in to unyielding combined pressure from the president and BYUT,
changing literally at gunpoint its social agenda.

Nothing about this year's double-digit inflation and ballooning foreign
debt. Nothing about the crackdown on the media launched by the thuggish

Oleh Kalashnikov right after the Regions came to power.

It all shows that the election campaign has really got under way.
MAJOR PLAYERS' STRATEGIES
Sobered by the Regions comeback, Ukrainian democrats (Our Ukraine,

BYUT and a number of smaller parties) took no time to unite in a 10-party

Our Ukraine-People's Self-Defense mega bloc. Moreover, they even

committed themselves to merge into a single party after the elections.

However, against the backdrop of typical horse-trading for representation
quotas and posts already on the way to the mega bloc, chances are strong
that the member parties might not be that unanimous in the aftermath of the
electoral race.

Meanwhile, some leaders of the fringe nationalist parties (Yury Kostenko)
have already made preemptive declarations about ideological differences and
the difficulties of working together with leftist and less nationalist-minded

comrades like BYUT or Lutsenko's Narodna Samooborona (People's Self-

Defense).

Unlike the democrats, the Regions party has again decided to go it alone. A
close-knit party, the Regions do not opt for any blocs with other players.
It was the party's overriding policy in the March 2006 parliamentary
elections and it remains so in 2007.

Interestingly, there have been opaque swallow-ups of minor parties by the
Regions, with their leaders (Anatoly Kinakh and Inna Bohoslovska) granted
shoe-in seats on the Regions roster.

As, in the case of such puppet parties, their voters typically go with their
leaders, it indicates how much the Regions are worried to raise their tally
in the coming vote.

On the other hand, the Regions managed to keep the Communists and Socialists
well in line as part of the 2007 government coalition. What was the unifying
motive for such a bizarre marriage: money and positions in the Regions
government for Communists and Socialists, their wish to survive or their
common hatred for everything Ukrainian?

As regards BYUT, it has emerged as an even more solid party after Pynzenyk's
Reforms and Order party has merged with Yulia Tymoshenko's Batkivshchyna.

After the Regions stated their intent not to join forces with any party,
both the Communists and the Socialists have little choice but to go it
alone. These parties are too big and their agendas too different for their
members to forgive Moroz or Symonenko jumping, like Kinakh, on the

Regions bandwagon.

Besides, experienced political old timers Symonenko and Moroz are wary of
such cooperation with the aggressive Donbas party. Not to mention that hopes
of scoring well in the elections, making it to Verkhovna Rada and acting
(and benefiting) as balance tippers in forming coalitions apparently still
prevail.
PARTY ROSTERS
Compared with March 2006 elections, several promising developments have
taken place. First, major political players, save for the Socialists, are
trying to put on a more humane face by not including their hardliners and
hawks in the top ten. (It can also be an indication of their growing
hypocrisy!) Second, few, if any, showbiz people can be found in the parties'
electoral lists.

Like other parties, BYUT insists there are no more fat cats (oligarchs) on
its slates. Asked the question, Yulia Tymoshenko responded that oligarchs
were ruthless tycoons trying to grab power to lobby their private interests.

Like Our Ukraine-People's Self-Defense, BYUT earnestly believes stripping
lawmakers of their immunity from prosecution will stop fat cats from running
for parliament.

In a similar move, Our Ukraine has admittedly purged its ranks of the "liubi
druzi" (cronies of Pres Yushchenko who unceremoniously fought for power

and led to the collapse of the first Orange coalition in 2005).

The chief among them and also a confectionary tycoon who bankrolls Our
Ukraine, Petro Poroshenko, made a face-saving declaration at the Our Ukraine
convention, saying the president recommended him to concentrate on an
important economic project.

As regards the Communists, the top ten is a classical reflection of their
ideology, with peasants, workers and unemployed figuring on the list. How
about some education needed to draw up new legislation, comrades? Or will
they just raise hands to their boss' commands? Is it the kind of parliament
we need?

With the Socialists, their top five is the same line-up of die-hard fighters
against capitalism, not to mention the fact that for the last 12 months
they, as well as the Communists, have been in a coalition with the same
capitalists.

The battleground is set and the rivals are ready to engage in a campaign.
Will their goals be fair play or foul play? What will prevail - constructive
criticism or mud-slinging?

Ukrainians have grown more allergic to lies and smearing, and politicians
must be aware that they will hardly get away with it this time. Voters don't
need courts to tell them what's wrong or right.
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[return to index] [Action Ukraine Report (AUR) Monitoring Service]
========================================================
Send in a letter-to-the-editor today. Let us hear from you.
========================================================
13. MARATHON OIL COMPANY JOINS THE U.S.-UKRAINE
BUSINESS COUNCIL (USUBC) IN WASHINGTON

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14. EASTERN EUROPE'S UNTAPPED MASS MARKET
Disposable income concentrated mainly in just
three countries - Poland, Ukraine and Russia.

By Stefan Wagstyl, Financial Times, London, UK, Monday, August 6 2007

Go to almost any capital city in the former Communist countries of eastern
Europe and the former Soviet Union and you will see a full range of
international luxury brands. Mercedes-Benz, Cartier and Armani appear in
even the remotest places.

These products appeal to the region's growing number of rich people. But
they do nothing for those lower down the income scale.

Multinational companies have been slow to reach out to these
lower-middle-income consumers, who have often had to go without or make

do with shoddy, old-fashioned or second-hand products.

The picture is now changing, most clearly in the car market, where the
success of Renault's low-cost Logan model has taken the industry by
surprise. Since it launched the Logan in Romania in 2004, Renault has sold
about 600,000. Inspired by success in eastern Europe, it has expanded
production around the world.

Promoted originally as the Euro5,000 car, the Logan has in fact been sold at
Euro7,000-Euro10,000. But even at this price it has brought into the new car
market buyers whom car producers had not previously considered as potential
customers. The race is now on to build even cheaper vehicles.

Boston Consulting Group urges multinationals in other sectors to follow
suit. In a report entitled Tapping into Central and Eastern Europe's 200m
Neglected Consumers, the management consultancy says: "Lower-middle-income
consumers in eastern Europe have been largely neglected by western marketers
and represent a major opportunity for growth and shareholder value
creation."

BCG calculates that 200m of the region's 350m people live on incomes above
the poverty line and below median household income - or $500 to $1,300 a
month in central Europe, and $350 to $1,050 in the former Soviet Union.

Together they account for half the region's disposable income, most of it
concentrated in just three countries - Poland, Ukraine and Russia. This is a
much larger market than the 50m people on top incomes that multinationals
have already successfully reached.

The report urges companies to develop "affordable offerings" using low-cost
sourcing, efficient marketing and flexible pricing.

For some groups this is hardly news. BCG cites Coca-Cola as an example of a
company that already carefully tailors prices to local incomes, with the
standard 2-litre bottle costing 60 per cent less in Russia than in Austria.

However, in other sectors, multinationals are much slower to adapt. BCG says
that with washing machines, low-priced models are similar in price to those
in western Europe. It calculates that an entry-level machine costs 20 hours
average pay in Austria, 69 in Poland, 121 in Russia and 193 in Ukraine.

The report somewhat underplays what has been done already in developing
low-cost goods and services. Gideon Richter, the Hungarian pharmaceuticals
group; Podravka, the Croatian foods company; and Sandora, the Ukrainian
juice maker are all local companies that have taken account of poorer
customers.

Among multinationals, the brewers, including Heineken and South African
Breweries, have developed cheap brands as well as premium beers. Low-cost
airlines have opened up international travel. Metro, Auchan, Tesco and other
retailers have rolled out cheap own-label brands. Consumer finance markets
are booming, easing access to credit for those on lower incomes.

But there is undoubtedly much more that can be done. And there is scope for
genuine - and profitable - surprises, as Renault has discovered.

More is at stake than simply meeting consumers' needs. Among the key
political concerns are the yawning gaps between rich and poor, and between
the region as a whole and western Europe.

Economists forecast that the region's incomes will slowly catch up with the
west's thanks to higher economic growth rates. As countries become richer,
they will be able to finance educational, regional and social policies that
can reduce the local gaps between rich and poor.

But companies can do their bit to alleviate the effects of income
differences by developing more low-cost goods and services. Put simply, the
poor will not feel so poor if their money goes further and the quality of
what they buy improves. This is particularly true for products that act as
gateways to other goods and services.

A car is not just a convenient means of transport. It can provide access to
a life-changing experience such as an easy commute to a better job. The
internet, low-cost airlines and cheap credit can play similar roles.

There are political implications. A survey this year by the World Bank and
the European Bank for Reconstruction and Development showed that only

30 per cent of people in the region believe they are better off than in 1989.

Poverty is a powerful source of political alienation, and those who feel
they have not benefited from the post-Communist transition are often those
prone to supporting radical and even anti-democratic political parties.

If such people can be brought closer to the economic mainstream, they may
also be attracted to the political mainstream. Clearly, creating good jobs
is the best way forward. But, at the margin, providing an attractive range
of affordable products in the local store can also help

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15. U.S. PRODUCERS TAKE ON STEEL IMPORTS
Should existing duties on imported steel from China, India,
Ukraine and nine other countries should be continued.

By Robert Guy Matthews, The Wall Street Journal
New York, NY, Saturday, July 28, 2007; Page A2

Monday, a group of American steel associations will release a report that
says China steelmakers get tax breaks, loans and all manner of government
subsidies that make for unfair competition.

The release is timed as a pre-emptive assault aimed to sway import-duty
hearings to be held next week by the International Trade Commission. The ITC
on Tuesday and Wednesday is taking testimony on whether to continue leveling
extra charges on hot-rolled steel from several foreign countries, including
China.

The groups that commissioned the study -- the American Iron and Steel
Institute, the Steel Manufacturers Association, the Committee on Pipe and
Tube Imports and the Specialty Steel Industry of North America -- said the
results show that the Chinese steel industry won $52 billion in financial
assistance over the past 10 years. A spokesperson from the China Steel
Industry Association declined to comment on the report.

To be sure, American steel mills get subsidies also. Most notably, many U.S.
mills went through bankruptcy in the past few years and cast millions of
dollars in retiree benefits onto the government only to emerge leaner and
more profitable.

Several domestic and foreign producers are expected to testify at the
hearings next week to determine whether existing duties on imported steel
from China, India, Ukraine and nine other countries should be continued.

"It is ridiculous to conclude that these duties would be continued for
another five years," says Dave Phelps, president of American Institute for
International Steel, a group that represents both U.S. and foreign
companies, including those from China, who import and export steel products.

The ITC's final decision wouldn't likely come until September or October.
American steelmakers are used to the imports vs. domestic steel battle and
have recently won cases involving reinforced bar steel.

But next week's hearing could be a tough one. The U.S. needs to import 20%
to 30% of its steel because domestic mills, even running at full tilt, can't
make enough to meet domestic demand.

Moreover, steelmakers will have to prove they are being harmed by imports.
And the U.S. steel market isn't a great place for imported steel these days,
with foreign steelmakers able to fetch higher prices outside of the U.S.

"The U.S. price is the key reason why steel imports to the U.S. should
decline," according to a July 17 Goldman Sachs steel analyst research note.

Transportation costs also are high, hovering around $60 a ton just to get
the steel from the foreign maker to the U.S.'s East or West coasts.

Tack on a few more dollars a ton to get it to the Midwest, and the profit
margin is wiped out. Finally, the dollar is weak, making it even less
profitable for foreign steelmakers to sell in the U.S. As a result, fewer
imports are washing ashore. Steel imports in May, the latest period
available, fell 17% compared with May 2006.

American steelmakers are expected to argue, however, that imports increased
from April's numbers, especially from China. Indeed, Chinese imports grew
90%, normally a huge alarm to domestic steelmakers.

The increase, however, may be a one-month blip. China's Ministry of Finance
began a program this month that cuts the tax rebate on some exported steel,
so exports likely rose to take advantage of the rebate while it was still in
place.
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Write to Robert Guy Matthews at robertguy.matthews@wsj.com
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16. ING BANKING SEES INVESTMENTS IN UKRAINE

AROUND 50 MILLION OVER NEXT TWO YEARS

Stefan Kloet, Dow Jones Newswires, Amsterdam, Holland, Wed, Aug 8, 2007 .

AMSTERDAM - Dutch financial institution ING Groep NV (ING) expects

to invest EUR50 million in its greenfield banking operation in Ukraine in the

coming two years, ING Chief Executive Michel Tilmant said Wednesday.

Tilmant told reporters that it is part of the company's effort to expand its
retail distribution franchise eastward into the largest markets in the
region.

Tilmant added that he would be happy to invest more money, depending on the
number of branches ING can open in the country, adding that ING will spend
"a bit more in Ukraine than it did earlier in Romania."

Tilmant compared the planned startup in Ukraine to the way ING began
operations in Romania, where it spent EUR53 million in three years on its
retail branches to "establish a certain critical mass."

Tilmant said ING will start in Ukraine with a savings bank and later expand
its portfolio with other banking services there.

Tilmant explained that his choice for Ukraine instead of the larger Russian
market was based more on marketing than on politics. ING on Wednesday

reported net profit of EUR2.56 billion, up 27% from EUR2.01 billion a year

earlier.
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17. BRYAN MARCUS, NEW UKRAINE DESK OFFICER FOR ECONOMIC
AND BUSINESS AFFAIRS AT US STATE DEPT IN WASHINGTON

By Morgan Williams, SigmaBleyzer
President, U.S.-Ukraine Business Council (USUBC)
Washington, D.C., Monday, August 13, 2007

WASHINGTON - R. Bryan Marcus is the new Ukraine Desk Officer
in the U.S. State Department's Office of Ukraine, Moldova and Belarus
Affairs, Bureau of European and Eurasian Affairs, in Washington, with
primary responsibility for economic and business affairs.

The U.S.-Ukraine Business Council is very pleased to have Bryan on
board in this important position and look forward to working with Bryan.

R. Bryan Marcus joined the Foreign Service in 2002. Overseas he served
as Vice Consul and Political Officer at the American Embassy in Kingston,
Jamaica, as Economic Officer, American Embassy Asuncion (Paraguay),
and as Assistant Cultural Affairs Officer in Baghdad. For his contributions
to political reporting in Jamaica, he received the Department of State's
Meritorious Honor Award.

A native of Marion, Alabama, Marcus earned his bachelor's degree in
History and English from the University of Montevallo, Alabama and his
master's in International Affairs from the Graduate School of Public and
International Affairs (GSPIA), University of Pittsburgh. He speaks Spanish.

David J. Kramer is the Deputy Assistant Secretary for European and
Eurasian Affairs at the U.S. Department of State. He is responsible for
Russia, Ukraine, Moldova, and Belarus affairs, as well as regional
nonproliferation issues. Robert Boehme is Director of the Moldova,
Ukraine and Belarus desk at the US State Department.
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========================================================
You are welcome to send us names for the AUR distribution list.
========================================================
18. PM YANUKOVYCH, US DEPUTY ASSISTANT SECRETARY OF
STATE DAVID KRAMER DISCUSS THE ECONOMY, WTO
David Kramer makes his third trip to Ukraine this year

Ukrainian News Agency, Kyiv, Ukraine, Thursday, August 2, 2007

KYIV - Premier Viktor Yanukovych and Deputy Assistant Secretary for
European and Eurasian Affairs at the United States Department of State
David Kramer have discussed results of Cabinet of Ministers work in
January-June 2007. Their meeting is being held at the building of the
Cabinet of Ministers.

Yanukovych marked regularity of his meetings with Kramer adding that
he is glad that the United States pays so much attention to Ukraine. The
Premier said that on August 1, the government summarized work in
January-June 2007.

He marked that not only Ukrainian specialists gave positive estimation to
macroeconomic indicators of Ukraine, but also international experts,
including the International Bank for Reconstruction and Development.

Yanukovych marked that GDP growth in January-June was 7.9%, industrial
output was at the level of 12%, inflation was 4.2% and the growth of
investments amounted to 32%. He also marked that in January-June, wages
rose on average by 25% and pensions by 20%. The level of unemployment
fell to 2.6%.

Yanukovych also said that in 2007, the government has twice increased
wages to budget sector employees. In September, it plans to launch the
next stage of the wage increase.

At the same time, he said it would be difficult to implement the next wage
increase, as it will be necessary to use large resources. Yanukovych also
marked that trade balance was gradually stabilized in Ukraine.

As Ukrainian News earlier reported, in May, Yanukovych and Kramer
discussed political situation in Ukraine. Before, they discussed political
and economic situation in Ukraine in March.

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19. SUNFLOWER B&B HOTEL IN KYIV
"Who needs ads when you're this good?"

Lonely Planet website, August 2007

REVIEW - Word of mouth is all it takes for this tiny unadvertised place

[Sunflower B&B Hotel in Kyiv] to stay busy. Completely central and

completely well priced, it's probably one of the best deals in town. But

there are only a handful of rooms (all doubles, some with kitchens), so

book well in advance.

The yellow, Western standard rooms are spacious and quiet, with smooth
new light-wood floors, comfortable beds and raised ceilings.

You'll also get free in-room Internet access and a free in-room continental
breakfast (including a warm pastry), delivered on a cart by genteel
English-speaking staff at whatever time you request. Sound good? That's
because it is.

Even though the Sunflower is small and usually pretty booked up, the
personal attention and tranquillity make it easy to feel like you're the
only guests there. (vul Kostolna 9-41)

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FOOTNOTE: The Sunflower B&B Hotel is managed by Irina Paliashvili,

President, Russian-Ukrainian Legal Group.
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http://www.lonelyplanet.com/worldguide/destinations/europe/ukraine/kyiv?poi=1000107124

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20. FOURTH OF JULY SPEECH: BY WILLIAM TAYLOR,

U.S. AMBASSADOR TO UKRAINE

U.S. Embassy, Kyiv, Ukraine, July 4, 2007

Shanonvi hosti, kolehy, druzi. Vitaiu vas na svyatkyvanni Nezalezhnosti
Spoluchenykh Shtativ Ameryky. Ya duzhe radyti bachyty vas siohodni
uvecheri. Dlya mene ye chestyu pryimaty vas tut.

I also want to welcome Alcee Hastings, right down here - a U.S. congressman
who just flew in for a visit to celebrate Independence Day. (applause)

And also Mr. Moroz - Mr. Moroz welcome - representatives from the prime
minister's office, representatives from the presidential secretariat,
ministers, members of the Rada, past and future, (laughs) we're very glad
that you're all here.

National days give us the opportunity to think about our history as it
relates to Ukraine. I discussed this with Congressman Hastings as we were
driving to Kyiv from Boryspil airport.

One aspect is our Constitution. It took us a while after the Declaration of
Independence to adopt our first Constitution, because of the unpleasantness
with our British friends. Ambassador Barrow will remember that the Brits
were not so enthusiastic about our independence. (laughs) However, we
made it.

We're proud of our independence. Independence is a good thing. But our
first constitution adopted in 1781 didn't work. It failed so badly eight
years later that we had to scrap it and adopt a new Constitution.

Another aspect is the relationship between business interests and public
service. Many of you will have received the invitation to this event this
evening. On the cover, there is a painting of many of our founding fathers.
Not very diverse, you will notice. (laughs)

However, several of these men in this painting were very large land owners.
They were perhaps similar to some large steel magnates today in Ukraine.
(laughs) A little later on in our history people with names like Mellon,
Rockefeller and Carnegie made some money and then donated money to
the public service.

In order to keep governmental decisions separate from business interests, we
came up with financial disclosure requirements by senior officials and very
strict conflict of interest laws.

The third aspect has to do with our Supreme Court. Early on it did not enjoy
the authority and respect it has today. Congressman Hastings, who, before
being a member of Congress was a lawyer and a judge, knows a lot about this.

When our country was about 30-40 years old, President Andrew Jackson
didn't like a decision made by the Supreme Court, lead by Chief Justice John
Marshall. President Jackson was reported to have said: "Chief Justice
Marshall made his decision, now let him enforce it."

Mr. Baloha would probably recognize that sentiment. (laughs) As our
democracy matured so did the Supreme Court. In the year 2000 it had to
take a very difficult decision, a political decision on the outcome of the
presidential election. When they made that decision, that was it - nobody
questioned it.

So, we have 231 years of experience. Some good, some bad. We are very
proud of our democracy and our independence. We are very proud that
here, in Kyiv, we support Ukrainian democracy and Ukraine's independence.
(applause)

Before I finish, let me thank the sponsors who have made this reception
possible. For those of you who have drinks, unlike me, drink to Ukrainian
independence and American Independence. Bud'mo!
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LINK: http://kiev.usembassy.gov/main_eng.html
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21. MOLDOVA - A RETURN TO RUSSIAN INFLUENCE?

ANALYSIS: George Ballantine, Margareta Mocreac and Olga Khromova
BBC Monitoring research, BBC Monitoring Service
United Kingdom, Tuesday, August 7, 2007

Moldovan President Vladimir Voronin, leader of the last communist party in
Europe and a former Soviet-era general is, according to reports published by
US-based think-tank The Jamestown Foundation, allegedly negotiating a
"secret plan" with Russia for

Moldova's reunification with the breakaway Dniester province and a return to
Moscow's orbit in exchange for Kremlin's support for his regime in the next
year's parliamentary elections.

According to international and regional media, the plan was officially
rejected by Voronin in two recent marathon-length speeches, in which he
blamed all the opposition political parties in the country and foreign
forces for destabilizing the country.

Meanwhile, international media is showing alarm at the presence of Russia's
peacekeeping troops in the Dniester region and its renunciation of the
Conventional Armed Forces in Europe (CFE) Treaty as a sign of Moscow's
increased foreign policy assertiveness for its near abroad countries.
Russia refuses to withdraw troops from Dniester
Dniester, a strip of land to the east of the Dniester River, sandwiched
between Moldova proper and Ukraine, split from Moldova after a brief civil
war in 1992. The province maintains an unrecognized independence, supported
by Russia's cheap gas and its contingent of "peacekeepers".

In spite of many rounds of negotiations within the so-called "5+2" format,
with the participation of OSCE, the EU, Russia, Ukraine and the USA,
together with Moldova and Dniester, the conflict remains unresolved to this
day following Russia's refusal to withdraw its troops in accordance with the
CFE Treaty and 1999 OSCE summit in Istanbul.

According to Dniester-based publication Pridnestrovye on 31 July, Moldova
congratulated the peacekeeping mission in the Dniester region on the
occasion of its 15th anniversary "in a strange way", by asking it to leave.

In an official statement, Moldova said that the peacekeeping force has been
"highly efficient" thanks to Ukrainian and OSCE participation, while the
presence of Russian soldiers "impeded the settlement of the conflict", the
paper said.

Chisinau's relations with Moscow worsened after November 2003 when Moldova
rejected Russia's suggestion of a federal republic in which Dniester would
remain an independent entity.

Local analysts explain Voronin's attempt to improve ties with Russia by his
disappointment with the West for not helping him enough in solving the
Dniester conflict and for not giving Moldova a clear sign regarding its
prospects of joining the EU.
Dniester leader - "Guarantor of Russia's military presence"
On the other hand, Dniester leader Igor Smirnov believes, according to the
Tiraspol Times - an English paper based in the Dniester capital Tiraspol -
that the suspension of Russia's participation in the CFE Treaty on 14 July
"increases the chances for Tiraspol to get back its status of Russia's
principal ally in the south-west of the former USSR."

On the same line, the Tiraspol daily Pridnestrovye said on 16 July that "if
Russian President Vladimir Putin's decree on the CFE Treaty means for the
Kremlin a way of geopolitical fight with the USA and NATO," then, for Igor
Smirnov the move represents a "recognition that he is a reliable guarantor
of the Russian military presence in Dniester."
Media report "secret plan" for reunification of Moldova
According to an article published initially by The Jamestown Foundation and
taken up by The Economist and other international media outlets, Moldovan
President Voronin is allegedly negotiating a "secret plan" with Kremlin for
a conflict settlement in the Dniester region which will bring the Republic
of Moldova "back to the Russian sphere of influence."

Russian news agency Regnum said on 20 July that the agreement allegedly
envisages that Moldovan and Dniester Presidents Vladimir Voronin and Igor
Smirnov would sign a joint declaration on parallel self-dissolving of the
Moldovan Parliament and the Dniester Supreme Council and would call for new
parliamentary elections.

Although the Moldovan opposition would object, the plan envisages that by
the end of 2008, separate elections are to be held simultaneously in Moldova
and the Dniester region.

The Moldovan parliament would give 18-19 seats to MPs from the Dniester
province. Dniester will reportedly be represented at the central Moldovan
government by first deputy prime minister and deputy ministers for each
ministry delegated by Tiraspol.
Voronin denies "secret plan"
Moldovan President Vladimir Voronin denied the "secret plan" on 20 July in a
long interview broadcast by the Chisinau television channel NIT in Russian,
for its eastern audience.

"As soon as we approach the problem of the Dniester region's settlement, at
once we hear cries about treachery that are made in order to frighten
foreigners. There is no secret plan for the Dniester region and there is
also no sense in engaging in secrecy."

However, Voronin acknowledged that Moldova is ready to offer the Dniester
region an autonomous status. "A tentative scheme of the Dniester region's
integration in Moldova over a period of over 10 years has been probe-tested
in the Gagauz autonomy, which envisages the participation of the Dniester
region in the country's national administration. I proposed to make the
leader of the Dniester region a member of the government," Voronin said.
Voronin seeks Communist Party's continuity in power
Voronin continued his arguments in a marathon-length press conference on 25
July aired by NIT TV in order to defend his non-transparent negotiations
with Russia on Dniester and to assess Moldova's domestic policy.

This time he repetitively lumped all non-communist parties together as "the
opposition", "right-wing" and "in the pay of" Moldova's ill-wishers, and
dubbed parties critical of his separate negotiations with Russia on Dniester
as "enemies of the people".

In this way Voronin was trying to regain control of the country when now,
past the mid-point of his final constitutional term of office, his authority
even over the Communist Party is eroding.

Indeed, according to Eurasia Daily Monitor on 30 July, "the presidential
team seems to consider the possibilities of using the bilateral solution
with Russia as a means to shift Moldova's internal political balance in the
Communist Party's favour and ensure the existing authorities' continuation
in power after 2008."

But this aim is by no means ensured when generation change among Moldova's
elite is raising for the first time the prospect of electoral outcomes not
led by the Soviet-era and early post-Soviet nomenklatura in the Communist
Parties or other parties.

However, taking into account how divided the opposition parties are, the
Communists chances are still not so bleak, at least for the time being.
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22. KILLERS WITH IDEOLOGIES,

Was Lenin as bad as Stalin and Hitler?

Book Reviewed by Simon Sebag Montefiore
The Washington Post, Washington, D.C.
Sunday, August 12, 2007; Page BW06

LENIN, STALIN, AND HITLER
The Age of Social Catastrophe
By Robert Gellately
Knopf. 696 pp. $35

"The image of Lenin that emerges from the pages of this book, even the
mere mention of him in the title alongside Stalin and Hitler," writes Robert
Gellately in the introduction to his new study of the epoch of the great
slaughterhouse in the 20th century, "will disturb some people."

The author, a distinguished academic, adds that "a good friend of mine . . .
said the very thought of putting Lenin next to Stalin and Hitler in the
book's title would be enough to make her Russian grandmother turn in
her grave."

But let that Russian grandmother turn: It's time to rip up the accepted
versions of this terrible period and analyze it on the evidence that we now
have. Gellately has done just that in a book that is both sensible and
sophisticated, scholarly and very readable.

The book starts with World War I and the Russian Civil War, and this makes
sense: The Great War was the furnace of crazed human destruction that

forged these three super-killers. The chapters on the 1930s are especially
interesting for bringing out the differences between the regimes.

While Stalin, who had emerged as dictator in the mid-'20s after Lenin's
death, was killing millions of peasants in the collectivization of 1932-33
and then millions of his own communist comrades in the Great Terror of 1937,
Hitler, who was elected chancellor in 1933 and became head of state the
following year, had all but stopped killing.

There were hardly any executions in Germany in the '30s. Even during the
worsening disaster of World War II, Hitler played off his paladins against
one another but very rarely executed them. He sent his noble Prussian
generals on holiday rather than having them shot.

This shows that the Nazis believed themselves to be popular, whereas the
Bolsheviks had no illusions about themselves. The Nazis felt they did not
need to kill their own people, and in particular they spared the Prussian
generals because the officer class was basically loyal (and willing to
ignore the slaughter of Jews and Slavs) so long as Hitler delivered victory.

Only when faced with total disaster in the summer of 1944 did the spirit of
resistance attain the momentum to launch a plausible attempted assassination
and coup -- the July '44 plot.

Afterward, Hitler started killing his own officers -- because he needed to
do so. With the start of his Russian invasion, the regime's nature was
revealed in the massacres of Jews and commissars. The Nazis considered the
killing of non-Germans as part of the struggle for German racial survival,
and the more severe the fighting became on the Eastern Front, the more
imperative it became to kill "polluting" civilians such as the Jews.

The Holocaust started as soon as Hitler invaded Russia. The Bolsheviks, who
were besieged by invaders and faced with civil war immediately after their
seizure of power in 1917, on the other hand, had to engage in violence and
terror right away in order to keep their hold.

We should draw parallels between these two diabolic regimes. But I wonder
if, with the latest revelations of Stalinist killings, the balance hasn't
shifted too far.

Since the publication of my book Stalin: the Court of the Red Tsar, I am
constantly being buttonholed by earnest history buffs who inform me that
Stalin was "much worse than Hitler, yet all we ever heard about was Hitler's
crimes while Stalin, who killed so many more people, got away with it."

But those who play the parlor game of identifying the greatest monster of
all time risk falling into the trap of Stalinist cynicism: "One death is a
tragedy, a million is a statistic," he supposedly said. We have to accept
that there were many such monsters and that every victim is a tragedy.

We will never know how many people Stalin murdered -- Gellately discusses
various numbers for what he calls "Soviet-on-Soviet killing" that range from
10 to 20 million, not even half the approximately 40 million who died in
World War II because of Hitler, not to mention the 6 million Jews.

Weighing the evidence sensibly, Gellately concludes that these two terrible
regimes, with all their differences and similarities, were jointly
responsible for an age of social catastrophe.

This is familiar, but the inclusion of Lenin is the difference. Gellately is
right to consider Lenin a maniacal mass-murderer, the creator of the
repressive Soviet dictatorship and the promoter of Stalin. I was taught at
school that Lenin was decent, Stalin a mad butcher.

This was Khrushchev's argument in 1956, and it became leftist orthodoxy.
We now know it's a lie. Richard Pipes's Unknown Lenin (1996) and Robert
Service's Lenin (2000) have shown the real, brutal Lenin.

In my own research into young Stalin, I found much new evidence of an early
and close relationship between him and Lenin. Their alliance really started
in the years 1905-07 when Stalin, a ruthless bankrobber and gangster
kingpin, became Lenin's chief fundraiser: "Exactly the sort of man I need,"
said Lenin. (Gellately's allegorical granny should have been spinning for
some time.) Gellately's material on Lenin is nothing new, but he presents a
fine synthesis of it.

As for Stalin, Gellately perhaps leans too far toward the old view that he
was a gray bureaucrat, the assessment propagated by Trotsky and repeated
in virtually every biography until recent times. Evidence overlooked by
Gellately suggests, however, that Stalin was a very dynamic politician --
but that is a small gripe. Gellately is correct in arguing that Lenin and
Stalin shared fanatical beliefs and bloodthirsty methods.

To underscore the point about Lenin, let me conclude by quoting from a
typical memorandum written by that murderous Bolshevik on August 11, 1918:
"1. Hang (hang without fail so the people see) no fewer than one hundred
known kulaks, rich men, bloodsuckers. 2. Publish their names. 3. Take from
them all the grain. 4. Designate hostages -- as per yesterday's telegram.

Do it in such a way that for hundreds of versts [one verst is about one
kilometer] around, people will see, tremble, know, shout: they are
strangling and will strangle to death the bloodsucker kulaks. . . . P.S.
Find . . . truly hard people." This is a far cry from the decent man
Khrushchev tried to sell us. ·
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NOTE: Simon Sebag Montefiore's new book, "Young Stalin," will

be published in October.
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http://www.washingtonpost.com/wp-dyn/content/article/2007/08/09/AR2007080901981.html
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23. THE CRIMEAN MOUNTAINS AND CRIMEAN RIVIERA

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